
Financial Risk Manager Part 1
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When comparing the prices of a futures contract bought through an exchange and a forward contract negotiated directly with a counterparty, assuming both contracts have identical maturity and delivery terms, the futures price tends to be lower than the forward price, given no arbitrage opportunities are present. What single factor, if examined in isolation, could effectively explain this observed price difference, especially in the context of anticipated rising interest rates?
When comparing the prices of a futures contract bought through an exchange and a forward contract negotiated directly with a counterparty, assuming both contracts have identical maturity and delivery terms, the futures price tends to be lower than the forward price, given no arbitrage opportunities are present. What single factor, if examined in isolation, could effectively explain this observed price difference, especially in the context of anticipated rising interest rates?
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